As budgets tighten, new data shows where millions of shoppers are choosing to spend
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Aussie shoppers are increasingly turning to foreign-owned budget grocery retailers Costco and Aldi as cost of living pressures continue. New ATO data shows the two chains recorded record profits in Australia in 2025, earning a combined $20 billion, 9News reports.
This surge in sales at Costco and Aldi comes at the expense of local giants Coles and Woolworths, which each reported growing challenges in the supermarket space as consumers increasingly shop at alternative food retailers to stretch their budgets further.
The surge in sales at Costco and Aldi comes at the expense of Aussie supermarket giants Coles and Woolworths. Getty Images
Ikea is also gaining ground on competitors, with the budget furniture brand proving to be a favourite with buyers nationwide, although Kmart’s recent foray into affordable homewares and furnishings via its K home outlets will keep Ikea on its toes. In addition to this, there are reports Costco plans to expand its homewares and furniture offerings.
But it is in the grocery space where Costco, and Aldi, appear to be gaining the most traction.
Aussies are increasingly turning to the two foreign-owned budget grocery retailers. Jo Abi
Retail expert Gary Mortimer from Queensland University of Technology predicts this trend will keep growing as families tighten their belts even further at the supermarket checkout.
“I think it just goes to show consumers are becoming incredibly savvy when it comes to saving during a cost-of-living crisis,” Mortimer told nine.com.au.
“One of the things Aussie families face every week is food and groceries. It’s just a product category you cannot avoid.”
Consumers increasingly seek budget brands
The switch to Costco and Aldi comes alongside rapid growth in sales of affordable supermarket home/private brands, with the two stores leading the way in this category.
“If we go back 20 years, people didn’t buy generic products, and people didn’t shop at Aldi. It was seen as cheap,” Mortimer said.
The switch to Costco and Aldi comes alongside rapid growth in sales of affordable supermarket home/private brands. Jo Abi
“Today, people are really looking at private label products. They’re looking at alternative ways that they can save on their food and groceries.
“So, they’ll go to discounters like Aldi, or they’re shopping in bulk at Costco to save on that unit price.”
While Coles and Woolworths are often referred to as a “duopoly” in the Australian grocery market, Mortimer says current trends show this “narrative” may not always be the case.
“People will shop across multiple brands of retailer, including third-tier discounters like The Reject Shop, which will soon be called Dollarama, to access food and groceries,” he said.
“Or they’ll shop online at Amazon to buy skincare products and shampoos to save on those costs.”
Additional international grocery brands unlikely
Addressing reports of potential new international players in the Australian grocery space, Mortimer said this is unlikely due to the small size of our market compared to larger ones globally.
“We don’t have the population here to support another big international player to enter the market,” he said.
Mortimer doesn’t expect international retailers like Tesco to enter the Australian market. Getty
“That’s why Walmart haven’t looked at us, why Tesco and Sainsbury’s haven’t looked at us, or Asda, Carrefour ... we’re too small. Lidl, the other discounter, they thought were going to come when Aldi entered. Now Aldi’s captured that market, so Lidl won’t come.”
German chain Kaufland attempted to enter the Australian market, acquiring 29 sites, before abandoning the attempt in 2020.
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“The food and grocery market in Australia is around about $150 billion a year. If you come in, and you capture maybe two per cent of that, it’s just not enough revenue run your stores,” Mortimer continued.
“Aldi did it successfully. They had two stores in Sydney in 2001, but they were underpinned by 14,000 stores globally, so they could run that until they were able to scale it.
“Aldi is such a good business model. People know what they’re going to get. They’re not going to get a lot of brands, not going to get a lot of choice. But if you’re willing to forgo brand and choice, you’ll get lower prices.
Costco has plans to open an additional 20 locations over the next five years. Getty
“And in a cost-of-living crisis, when I’m putting $2.80 a litre of petrol in my car today, I’m shopping at Aldi.”
Costco and Aldi are taking their success and running with it.
Costco has plans to open an additional 20 locations over the next five years in high-growth areas, and Aldi has also plans to open around 100 new stores nationwide.
“The challenge is Costco needs land and space, which has delayed their expansion, but with Aldi, you can have a small Aldi store anywhere,” Mortimer said.
Aussie jobs and local produce
Mortimer doesn’t see Costco and Aldi being foreign-owned, in the US and Germany respectively, as an issue – and despite some criticism, consumer behaviour is certainly reflecting that.
Aldi has also plans to open around 100 new stores nationwide. Nine
“They employ Australians. All of their fresh produce is Australian fresh produce. All their bakery items are Australian, their milk products are Australian,” he said.
“Possibly, some of their biscuits and some of their cosmetics might be from overseas, but you’ll find that’s the case with big supermarkets as well.
“Ultimately, the food and grocery sector is a highly competitive sector. The narrative of it being dominated by two big players ... I don’t think that’s the case any longer.
“I think Aussie shoppers are actively shopping across multiple brands of retailer in order to save on the costs they incur every single week.”
